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Thursday, May 19, 2016

In case you didn't know...

Thanks, Minimum Wage and the Drug War: Nearly 1 in 6 Young Men Are Jobless or Jailed

Ryan McMaken

The Congressional Budget Office (CBO) today released a new report concluding that in 2014, 16 percent of men between ages 18 and 24 were jobless or incarcerated. Out of a total of 38 million young men in the age group, 5 million were unemployed and one million were jailed.

In 1980, 10 percent of men in this category were jobless and 1 percent were incarcerated; those shares rose to 13 percent and 3 percent, respectively, in 2014.

Causes of Male Joblessness and Incarceration

The report lists several factors behind the increase:
•Economic changes: this includes more women entering the workforce and a decline in the demand for unskilled labor. Not surprisingly, the least skilled and least educated men have been impacted the most.
•Policy changes: This includes changes to military policies in which men with no high school diploma are no longer accepted in the military. The report also notes that the military now accepts more women in the military which has decreased the demand for men.
•Another factor is increased enforcement of child-support laws which has "made employment less attractive to some young fathers, because they can now keep less of their earnings."
•Interestingly, the report also cites minimum wage laws as a cause of unemployment. The report notes that increases of state-level minimum wages has increased joblessness.
•Incarceration has increased as well, due largely to more harsh sentencing rules which "have made nationwide incarceration rates about four times as high as they were in 1980." Most of these laws, the report notes, have occurred at the state level, and most prisoners are in state and local prisons and jails.
•The report also notes that spending on means-tested social benefits has also increased over the time period, which provides a disincentive to young men to take steps to increase their own wages.

Oddly, the report at no point mentions drug laws or the drug war, although the sentencing rules to which the report refers have been heavily impacted by the drug war.

Trouble Ahead

The implications for this trend are significant and point to social and economic problems in both the short term and long term.

Workers who enter the workforce later, whether due to joblessness or to incarceration, will be less productive workers. Over time, that will mean a less productive economy, and it also means those specific workers will be more likely to have to turn to public assistance during their careers, and especially later in life as they reach retirement without significant retirement funds of their own. An economy with fewer productive workers will have a higher cost of living and lower real wages.

This will lead to sociological problems as well, as young, unemployed men are more likely to engage in crime, and young formerly incarcerated men are much more likely to engage in crime. Former convicts have much greater trouble finding work, and are also more likely to be victims of crimes themselves. The overwhelming majority of homicide victims, for example, have been jailed in the past.

End the Minimum Wage, End the Drug War

Reading the report, it's difficult to not come to the conclusion that if we want to take steps right now to help young men become gainfully employed and stay out of prison, the two easiest things we can do is lower or eliminate minimum wages, and end the drug war by decriminalizing drugs while reversing the trend toward more harsh sentencing.

Even apart from this report, the federal government has long admitted that minimum wage laws increase unemployment. This is why federal regulations make an exception to minimum wage laws for disabled workers. Federal policy specifically accepts that disabled workers may have lower productivity, and thus are unemployable at or above the mandated minimum wage.

Similarly, young men often begin their careers with very few job skills and are unemployable at the mandated minimum wage. In most cases, though, it only takes a few months for their productivity to rise to the level of the minimum wage. With a rigid one-size-fits-all minimum wage, however, the first rung of the employment ladder is placed too high for many young men, and they are unable to find employment of any kind. While total elimination of the minimum wage (as is the case in Switzerland) is preferable, a humane step in the right direction would be to at least make an exception for workers under age 25, or to allow a minimum wage for workers during the first six months of employment (to note one possible variation). Until then, many young men will simply be denied the chance to even get their foot in the door of employment.

The drug war is the other major factor in keeping male productivity low and joblessness high. Many young men — including young husbands and fathers — have their lives destroyed for petty drug offenses that lead to draconian jail and prison terms that in turn render them virtually unemployable. And, of course, they can't work while jailed. While total drug legalization is best, a step in the right direction would be to decriminalize drug infractions (as is the case in Portugal) and eliminate jail time and prison terms. As Justin Murray notes here, the American legal system also employs prison terms for many infractions that incur only a fine in most other wealthy countries.

While it is also true that increases in welfare spending provides a disincentive to work, minimum wages and the Drug War often make employment virtually illegal for young men. While steps should be made to reduce these disincentives, a good first step would be to simply stop making men unemployable in the first place.

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